II. Background

SDG&E filed its ERRA application in response to Commission directives in Decision (D.) 02-10-062 and D.02-12-074. Those decisions established ratemaking mechanisms to enable California investor-owned electric utilities to resume purchasing electric energy, capacity, ancillary services, and related hedging instruments.

Decision 02-10-062 established an ERRA balancing account for the major energy utilities to track fuel and purchased power revenues against actual recorded costs.¹ This balancing account was modeled after the Energy Cost Adjustment Clause (ECAC) balancing account. That decision also required the major energy utilities to establish a fuel and purchased power revenue requirement forecast for 2003, a trigger mechanism, and a schedule for semiannual ERRA proceedings through an initial ERRA application.

Decision 02-12-074 modified and clarified the cost recovery mechanisms adopted in D.02-10-062. Those modifications and clarifications required the major utilities to amend their initial ERRA tariffs to, among other matters, identify the trigger and threshold amounts. In addition, D.02-12-074 established a June 1 and December 1 semiannual ERRA application schedule for SDG&E.

SDG&E's ERRA tariff provides for its June 1^st ERRA application to address an energy resource forecast for the upcoming twelve months and a new ERRA rate based on that forecast. SDG&E is not requesting any rate change in this the California Department of Water Resources (DWR) revenue requirement and the San Onofre Nuclear Generation Station (SONGS) non-fuel costs, are being addressed in separate proceedings.² The December 1^st application will address the reasonableness of its ERRA, contract administration, energy resource expenses, and energy dispatch.